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The Bank of Canada will make its first interest rate decision of 2024 on Wednesday, with investors and consumers looking for clues as to when they\u2019ll see relief from the high cost of borrowing. Here\u2019s what economists think the governing council of the central bank will have to say:
<\/em><\/p>\nRoyce Mendes, Desjardins<\/h2>\n<\/section>\n\nArticle content<\/p>\n
The decision on what to do with interest rates is a bit of a no-brainer this time around, said Royce Mendes, managing director and head of macro strategy at Desjardins.<\/p>\n<\/section>\n
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\u201cYou don\u2019t need a PhD in economics to determine that the target for the policy rate should remain on hold at five per cent,\u201d Mendes said in a note on Jan. 19, adding that the bank finds itself in a mushy middle where growth and inflation are neither strong enough nor weak enough to warrant either an increase or a cut.<\/p>\n
Besides what to do with rates, another important decision faces the bank on Jan. 24: Governor Tiff Macklem and his deputies will have to decide whether to emphasize inflation minus shelter (which is now at 2.4 per cent) or core inflation (which is on the rise) as a guide post for future decisions.<\/p>\n
\u201cIn determining whether to emphasize the progress on inflation excluding shelter or the stickiness in the core median and trim measures, governing council will effectively be communicating whether or not the door is open to rate cuts in upcoming months,\u201d Mendes said.<\/p>\n
Rate watchers will be on the lookout for any shift in tone in the Bank of Canada\u2019s accompanying statement.<\/p>\n
Desjardins expects the bank of move off of the \u201chawkish\u201d tone of its previous statement on Dec. 6 and \u201clean more dovish,\u201d given feedback from the latest business and consumer outlook surveys that showed inflation expectations have eased.<\/p>\n<\/section>\n